Logistics and the Future
I always like to think about what the future will bring in Logistics Management. When one ponders how far we have come with over the last hundred years, we can see that logistics has grown vastly. I just want to touch on three quick items in this blog. First, what is logistics? Where is it compared to other technologies? Finally, what will be the future of logistics?
What is Logistics?
I see logistics management as the moving of goods, information, and money through different stages of the supply chain pipeline. It is also reversing that flow if needed (product returns). You will notice there are three parts to the supply chain, goods, information, and money. This goes along the supply chain.
It is interesting to note the variance one sees from each level of the process. As products go from raw goods, to the refiner, to the manufacturer, to the distributor, and then the reseller to the final customer there are different price ranges, contractual obligations, and information systems that can greatly affect the quality and delivery of the finished goods.
For example, a smart phone may have gold in it. The contract manufacturer will likely not work with the gold mine to buy the small amount needed in some of the leads in the components that make up the motherboard. This is a waste of resources for both parties and would likely cost more to all parties due to the economy of scale. You add the concept that most of the money and information flows through unique company IT systems, it gets complicated fast. This concept of uniqueness adds complexity through the system.
Compared to Other Technologies
I feel that Logistics management tools are coming along alright. With the internet and computers, the information that guides and directs our inventories, safety stocks, and finances allows automation and accurate records for reports instantly. This is even to the point where there is traceability throughout the supply chain and a history of product life. Some companies can do this better than others, but there is still some challenges in certain commodities to get complete product coverage. We do really well with the information side of Logistics.
When it comes to the physical movement of goods, that is another story. We can see clearly that there is much that can be improved. We can order a product and have the automation to the point where in seconds we have all the information that we need. Physically getting the product still takes time. Can you imagine if we placed an internet search and the response was that we will get the answer tomorrow morning at 8 am? In essence, this is what we face every time an order is placed and the part is not in the local area or in our inventories.
Currently the best we can do if the product is local, we can go pick it up, or have is shipped overnight for a higher cost, or at standard, we have to wait five days. With some products, the lead time can be over a year. This is due to the nature of the transportation.
There are five methods of transportation and carriers. There is ground, air, boat, pipelines, and train. There has been no major category added since the airlines. Sure they have improved current systems, but no new major category in moving products has been added since the airplane.
The cost of physically moving the product is also a major expense for any company that deals with physical goods. The cost of inventory is the same. How much could companies save if moving the product was less expensive and just as fast? This would free up resources to company growth and allow more research and development. It would be amazing to have the shipping costs be as cheap as an internet search. That is the challenge, is it not? The ones that come up with and implement the solution will be a major game changer.
The Future of Logistics
For the immediate and long term future, we will continue to see the same technologies that we have seen in the past. I am sure that any major improvements will be broadcasted loudly, such as the cars that drive themselves. I am sure we will start to see self driven trucks and deliveries, drone planes that will be focused directly on cargo being utilized more, and the trains will improve. The information and tracking systems will continue to improve with the RFID tags and cross decking technologies.
Everyone involved with the supply chain will see that there will be a demand for more technical workers and less workers overall. The automated warehouses with become more common, meaning less warehouse clerks will be needed and less managers. Schooling and training requirements will grow.
Those involved in purchasing will be freed of the more clerical aspects of the business and will start focusing more the the contractual agreements and pricing, where the real money is created. Scheduling will also be impacted, as it will continue to be clearer where and what resources are available.We have already seen this happen to a degree over the last thirty years.
One other item that is good to note is the 3d printers that have made a big hype over the last couple years. They will have an impact in the supply chain as the cost to create and manufacture prototypes and other 3d images happens in people's home. Inventories shift would go to more of the raw goods as their capabilities improve and more middlemen are removed from the supply chain.
As far as the physical movements of goods, besides what has been already mentioned, there is little on the horizon. There are talks of super pneumatic tubes, vacuum tubes that run on magnetic propulsion, that could transport goods and people at amazing speeds, but are just not practical due to safety and costs. There may come some things from this as technology improves, but don't hold your breath for the super trains around the world or the space elevator any time soon.
By Freeman Hyzer, CPIM
MBA International Business
